New Requirements Imposed on Insurers when Dealing with 'Victims of Abuse'

Matthew C. Lenahan, Esquire
Richard W. DiBella, Esquire
DiBella, Geer, McAllister & Best, P.C.
312 Boulevard of the Allies
Pittsburgh, PA 15222

Richard W. DiBella is a shareholder and Matthew C. Lenahan is an associate at the law firm of DiBella, Geer, McAllister & Best, P.C., a full-service insurance firm with offices in Pittsburgh.

On July 7, 2006, Governor Rendell signed into law House Bill 1632, which amends the Unfair Insurance Practices Act (40 P.S. § 1171.1 et seq) to further define the definitions of "abuse," "unfair methods of competition" and "unfair or deceptive acts or practices." These new amendments, which took effect on September 7, 2006, will dramatically alter the way in which insurers deal with claims submitted by insureds who are "victims of abuse", as defined by the statute. In summary, these new amendments prohibit an insurer from refusing to pay an insured who is a "victim of abuse" for property losses arising out of abuse to that person, if the loss is caused by the intentional act of another insured. Also, these new amendments require an insurer to provide certain notifications to an insured if a claim is submitted arising from abuse.

WHAT INSUREDS ARE PROTECTED BY THESE NEW AMENDMENTS?

In order to qualify for the protections of these new amendments, an insured must fall into the protected class, and be a "victim of abuse."

First of all, these new UIPA amendments apply only to people "covered under" the Pennsylvania Protection from Abuse Statute. These individuals are defined as "family or household members, sexual or intimate partners or persons who share biological parenthood." While it has been suggested that this language should be interpreted to mean that the UIPA amendments are limited to apply only to that defined group of individuals defined in that statute and only if they are under the protection of a protection from abuse order, it appears that there is no necessity that an actual abuse order have been issued, and that the UIPA applies to those who fall within the class "covered under" the domestic abuse statute, i.e., family or household members, sexual or intimate partners or persons who share biological parenthood.

In order to further qualify for the protections of these amendments, the insured seeking coverage must have also been a "victim of abuse." The term "Victim of abuse" is a defined term under the UIPA. It means "an individual who is a victim or an individual who seeks or has sought medical or psychological treatment for abuse, protection from abuse or shelter from abuse." "Victim" is also a defined term and means "an individual who is or has been subjected to abuse." Although this definition may seem somewhat bootstrap, a "victim of abuse" can be any one of the following: 1.) a victim, simply meaning a person who has been subject to abuse; 2.) an individual who seeks or has sought medical or psychological treatment for abuse; 3.) an individual who seeks or has sought a protection from abuse order; or 4.) an individual who seeks or has sought shelter from abuse.

Thus, if an insured comes within the protected class, i.e., "family or household members, sexual or intimate partners or persons who share biological parenthood," and can satisfy any one of the requirements set forth above, for being a "victim of abuse," irrespective of whether or not a protection from abuse order was ever sought or ever obtained, he or she appears to enjoy the protection of the UIPA amendments.

HOW DO THE NEW AMENDMENTS AFFECT CLAIMS?

These new UIPA amendments make it an unfair insurance practice to deny coverage to an insured, who falls into the protected class and is a "victim of abuse", arising out of "abuse" to that insured by another insured. The UIPA definitions section has been amended to expand the definition of abuse to encompass the act of causing or attempting to cause destruction of property in an attempt at intimidation. (Previously, abuse addressed only psychological or bodily-type harm.) Based on the plain language of the amendment, this would appear to cover, for instance, a coinsured spouse who smashes the windows of an insured's car in an attempt to intimidate or control the behavior of that spouse. The same would be true if an insured spouse set fire to a home, again with the intention to intimidate or attempt to control the behavior of the other spouse. Previously, this type of loss could be denied with appropriate policy language barring the claim of one insured for the intentional acts of another. Under these new UIPA amendments, however, it would be considered an unfair insurance practice to deny coverage to the "abused" insured, as long as that insured falls within the protected class, discussed above. It should be noted that an insured is only obligated to pay a loss up to the "abused" insured's legal interest in the property; also, a payment to the "abused" insured constitutes payment as to all other insureds under the policy (which prevents an "abusing" insured from recovering anything as a result of his/her act).

Importantly, these UIPA amendments require an insurer, when they receive a claim from an insured that resulted from abuse to that insured, to provide notice to that insured which includes the following information:

That the insurer cannot refuse to pay a claim without conducting a reasonable investigation, and that such investigation may include or result in contact with other insureds. 
That, at the request of the insured, the insurer will not disclose the location of the insured to the other insureds or third parties as part of the investigation. 
That the insurer will notify the insured at least fourteen days prior to instituting any legal action against the insured alleged to have caused the loss. 
That, after an insurer has paid a loss as a result of the claim, the insurer may nonrenew coverage or impose a surcharge as to the insured alleged to have caused the loss as long as the nonrenewal or surcharge imposition is not done prior to the later of six months following payment of the claim or the policy's renewal date. 
The national domestic violence hotline number must also be provided to the abused insured.

CONCLUSION

These amendments to the UIPA make it an unfair insurance practice to fail to pay the claim of an insured who is a victim of abuse, if that loss is caused by an intentional act of another insured, calculated to control or intimidate. These amendments also provide new requirements for insurers when these types of claims are submitted. As these are new amendments, there has yet to be any judicial interpretation, and, as this occurs, there are bound to be changes and developing nuances. For the time being, however, all insurers should be aware of the factual situation that gives rise to these types of claims, and know that there are requirements that need to be met.